the nation," looking back on an extraordinary year as we covered it. and looking ahead to what comes next. it was a year that began on a sad and shocking note. our second broadcast of the year began this way. an awful day in tucson. a young, arizona congresswoman gabrielle giffords lies gravely wounded, shot through the head. giffords would survive but continues a long rehabilitation. the end of january was the beginning of an onslaught of... today on face the nation egypt in crisis. across the middle east demonstrators took to the streets as one regime after another fell. mubarak left egypt. qaddafi would die in libya. >> these winds of change that are blowing, i think i would

be a little less cocky in the kremlin with my kgb cronies today if i were putin. >> schieffer: by the middle of march attentions shifted to another unimaginable story. japan was overwhelmed by a triple disaster. first an earthquake, then a tsunami and a melt down at one of the country's nuclear reactors. then the biggest news of all. >> today on "face the nation," osama bin laden is dead. what next for the war on terror? evidence seized when bin laden was killed suggests he was still running al qaeda from his hideout in pakistan. in a bizarre turn of events back home, a new york congressman named anthony weaner had to resign after sending out inappropriate pictures of himself in his underwear to young women. by then politics was heating up and the economy became the story in a way none of us wanted to hear. >> bad just got worse. now what? . it is an embarrassment.

that's just the half of it. u.s. securities are no longer the safest place to invest your money. >> schieffer: newt gingrich announced for president. when he tried to explain a $400,000 bill at tiffany's jewelry, the late night comics had a field day. it looked like his campaign was over. but he recovered and goes into the iowa caucuses as one of the favorites. former members of the bush administration came out with books. and the former vice president admitted he said a couple of things that might make former secretary of state powell's head explode. powell came on "face the nation" to say his head was fine, thanks. >> the kind of headline you might see one of the supermarket tabloids write. i think dick overshot the runway with that kind of comment to sell his book. >> schieffer: all the republican candidates but romney and perry came to our table. during the herman cain visit, we got into it over his campaign ad that featured his

campaign manager taking a drag on a cigarette. was this meant to be funny? >> it was meant to be informative. the bit on the end, we didn't know whether it would be funny to some people or whether they were going to ignore it or. >> schieffer: let me just tell you it's not funny to me. cain then urged young people not to smoke. it's not a cool thing to do. >> it is not a cool thing to do. >> schieffer: the campaign rolled on with first one and then another candidate climb to go the top of the polls. congress didn't accomplish much of anything except record low approval ratings. and most of the problems we had at the beginning of the year are still with us. with a year like that, how could anyone predict what next year will bring? not to worry. we'll try as we bring together our correspondents to review the past and look to the future because this is "face the nation." captioning sponsored by cbs and now, from washington,

"face the nation" with bob schieffer. >> schieffer: good morning again and welcome to face the nation and our annual cbs news correspondent round table. joining me here in the studio chief white house correspondent norah o'donnell, political director john dickerson, congressional correspondent nancy cordes, national security correspondent david martin, and justice and homeland security correspondent bob orr. in new york, our senior business correspondent anthony mason. in london correspondent elizabeth palmer. elizabeth, i'm going start with you because one of the most dramatic moments on face the nation this year was when egypt suddenly erupted, everything was this turmoil there. when we switched to you here's what happened. >> there's reason to believe that the looters are police who have turned into thugs.

(plane flying close by overhead). you were not dive bombed as it turned out, elizabeth. they were just flying over for show. but how is it these days in egypt? we know what happened that day. where are we today in that part of the world? >> well, shortly after that incident, mubarak was forced to step down. and since then, egypt has been lurching very uncertainly toward electing a government. but the problem is the military doesn't really want to let go of power so we've had round after round of violence and chaos really. and the big winners so far are the islamists, the political party representing the muslim religion look set to form the next government. so it's highly unstable. >> schieffer: bob orr, the biggest story of the year in my view was the killing of osama bin laden. how is the war on terror these

days? >> well, that was a game-changer when it comes to core al qaeda, bob. the network put together by bin laden over a decade ago was preeminent in planning attacks against the west. getting bin laden was crucial if this country was going to bring down al qaeda. i think now we can say, we can start to envision the death throes of the core part of that network. that's all good news. core al qaeda is probably not capable of a 9/11 style attack anymore. but the bad news is this ideology has kind of flattened out and moved across a number of continents. we have hot spots in yemen, hot spots in somalia and north africa. so the threat goes on. it's just a little different. >> schieffer: david martin, another big story, the last u.s. military troops left iraq. there's still a large american presence there. but the last military troops are out. where are we on that? >> well, the day after combat troops left, the prime minister maliki issued an arrest warrant for his vice president on grounds that the

vice president was actually running a death squad. now, we have political crises in this country. we call it democrats versus republicans. there it's shiites versus sunni. we don't settle our political disputes by guns. in iraq they do. so the question is whether this crisis will dissolve into sectarian fighting that the iraqi army and police can't control in which case all the sacrifices of the past nine years are.... >> schieffer: what you're saying is that the whole thing might fall in? >> it could. the presence of the u.s. military was a big tamping device on top of all that seething sectarian discontent and hatred. >> schieffer: in this country, of course, nancy, and john dickerson, it was all about the congress and what the congress didn't do. i laughed one day and said, you know, it's a good thing

congress hasn't done anything this year because if they had, we wouldn't have any place to put it with all the news that we had otherwise. but it was quite a year up there on the hill. wasn't it? >> it was. i think what we learned this year is that divided government which in the past has produced some really remarkable pieces of legislation, doesn't produce the same kind of results when you have two parties that are so far apart the way that these two are right now. you know, the modus operandi on the hill for so-years has been to leave legislation to the last minute, funding the government, this payroll tax cut it's worked in the past but it doesn't work anymore because you have a new crop of tea party house republicans who have no interest in political expediencey. that's not what they ran on. they're not just going to get along. when they don't like a piece of legislation, they don't mind if it makes them look bad in the short term they're going to stand their ground. >> schieffer: and anthony mason in new york, perhaps the news that many of us found that kind of the most

discouraging-- i don't know what word to put on it-- but for the first time in a long time, u.s. securities were not the safest place to put your money. our financial securities were downgraded. this whole thing about the economy kept unemployment staying high. what was the biggest thing that happened this year, do you think? >> well, i think i would call it an embarrassment, bob. that's what it was. our debt rating was downgraded. it looked like, you know, that would cost us money because our interest rates would go up. but as its turns out, the rest of the world was in worse shape than we were. so in fact people were still investing money in the united states and still buying our debt. that didn't solve the jobs problem though. that continues to be the biggest lingering problem out of the financial crisis and the recession. we just aren't producing enough jobs. and even though the economy is kind of stumbling along, it doesn't look like it's getting a whole lot better.

>> schieffer: norah o'donnell, over at the white house, the president seemed to catch it from all sides. the republicans obviously don't like him. but a lot of people on the left were very disappointed in the president and say he didn't fight hard enough for the things they thought he ought to be fighting for. his approval ratings are certainly nothing to brag about. what's he going to do? >> well, no doubt it has been a very tough year for president obama domestically. as you pointed out his approval ratings have been below 50% for almost the entire year with the exception of the killing of osama bin laden where the president saw a spike in his approval ratings. jobs are still the number one issue for the president. he tried to put forward, change the debate on that disastrous summer on the debt ceiling debacle to talk about the american jobs act. only one small piece of that bill has been passed. that was of course to help veterans. this has been a difficult year for the president domestically but on foreign policy they believe it was a successful year.

not ohm did tilling of osama bin laden, they claimed some credit, of course, for successfully ending the war in iraq. while there are still sectarian tensions that exist. and they think that they've taken the fight to al qaeda in a way that president george w. bush has done. that will be a strength in the new election but i think this going to be next year is going to be a year when the president tries to pivot and tries to rack up successs on the economy or else he won't be re-elected. >> schieffer: john dickerson, you have the hardest job of all. as our political director. try to make some sense of the politics of all of this and what is going on. i have to say this is one of the most unusual-- for want of a better word-- campaigns that i've seen going into iowa here now. i mean up and down. the last time, i mean somebody said bob orr was now leading out in iowa. (laughing) >> you have a very good ground game. that picture nora paints of the president in peril. republicans see this golden opportunity right before them and they're so desperate to grab it. yet what has happened in this

primary season both nationally in the polls and in iowa, you've seen the "king for a day." you had bachmann doing well and rick perry going with. herman cain had his moment annuity gingrich had his moment. going into the caucus he's undergoing a blistering amount of attacks. he doesn't have the organization or the money to fight back. in part because his campaign was declared dead in june. so what's happening now going into the iowa caucuses it's all up for grabs again in a race where it's up for grabs. well, it goes in that way. mitt romney who has kind of stayed steady and at about 20% in the polls, that's where he is too. finally ron paul has supporters who love him. his supporters are not undecided like the rest of the republican voters. he is the one who is now having his little moment in the sun. >> schieffer: let me ask you this. let's suppose that somebody does eventually get the republican nomination. somebody will. that puts that person against barack obama. how does that campaign, how does the general election

start out? about even? will obama be favored? where do you see it right now? >> the 12 swing states. we forget the rest of the country. focus on the 12. where it stands there is in most of those it's about even. some polls you can show either the president or one of the republican frontrunners is ahead. but what we suddenly get very quickly into is a debate over a referendum on the president's behavior, the economy. almost exclusively unless we have some foreign event that interrupts. and then the president will try and stop that conversation and say, no, this is a conversation about the attributess, qualities and vision of whoever it may be-- mitt romney or newt gingrich-- and it is not going to be a pretty election at all. no more hope and change and glowing speeches. it's going to be a pretty ugly campaign. >> schieffer: why don't we take a break here. we'll come back because we have to talk about iran. we have to talk about a whole lot of things. in a minute. all over the world, cities are learning from other cities. smarter technologies cut response times in madrid,

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our foreign policy folks on this one. what about iran? what happens there, david? >> well, you know, defense secretary panetta gave this interview to scott pelley in which he said that the iranians would need one year to build a bomb. now that one year starts counting from the moment they make a decision to build the mom. he said they have no evidence that iran has made that decision. how are we going to know that? that's going to be a decision made obviously in great secrecy. so are the u.s. and more importantly israel going to be confident enough in their intelligence or are they going to decide that they cannot afford to wait any longer and particularly the israelis? when they look at iran and its nuclear program, what they see is adolph hitler in 1939. if they don't do something about it, there's going to be another holocaust. >> schieffer: ms. palmer, what would you add on to that

because up spent some time in iraq? >> i would say there's a huge power struggle going on inside iran between the president, ahmadinejad, and the supreme leader. whenever the iranian leadership is consumed with its own power struggle, it tends to act out and do something provocative to draw attention away. is this the moment they're going to act out by deciding to go after a bomb? it's a highly unstable and dangerous time. >> schieffer: bob orr, speaking of unstable, north korea. a long-time dear leader has passed. apparently. and gone on to whatever reward he has earned. what do you think is... what's the situation? what do we know about.... >> the problem is we don't know very much at all. we know virtually nothing about the successor's youngest son who has a bit of a western education. but this is a person who has pen purposely closeted away from the public. i think the question there is

who is going to really run the country? will it be entrusted to this young successor or will the military complex take control? i think most of the smart people are saying there might be a little bit of a power struggle here at least a vacuum an uncertainty that raises everybody's stakes because this is a flash point. this is kind of waiting to happen. we know the past that korea has always used provocation as a way to try to get its way. question is, will this continue. >> schieffer: nora, what do they think at the white house is the most dangerous place in the world right now? north korea or still the pakistan border? >> i think there are a number of hot spots. north korea in particular problem... one of the problems is it is more difficult getting intelligence in iran because it is a her metrically sealed place. on iran you see this administration the president make the case repeatedly that they believe they've imposed the toughest sanctions ever. if you talk to leaders in the middle east they believe there's more unity against iran. they believe they've done

that. there's still a great concern that iran could eventually develop nuclear weapon. but so far it's just been tough sanctions from this administration. >> schieffer: nancy cordes, among the things congress didn't do, we saw the collapse of the so-called super committee. but we kind of overlooked the fact that the law that created the super committee called for these draconian across-the-board cuts in places including the pentagon. at the end of next year. does anyone really believe congress will let those cuts go in now, go into effect? >> i think what we see this year is even when congress decides it wants to do something it didn't necessarily achieve it. even if you have some republicans and some democrats who want to roll back so-called see questions trags and make sure that those cuts aren't imposed they might not be able to marshal the support they need to actually pass a bill on it. you've heard the president come out very forcefully and say, look, i am going to stick with this. unless you can come up with some other way to cut $1.2 trillion from the budget, this

was supposed to be a big stick to force the super committee to act. and, you know, if the super committee doesn't get its act together, then this is what you get. >> schieffer: anthony mason in new york, is unemployment going to stay around 9% next year? is there any suggestion that it might get better? >> i think it will get a little better, bob. i think the first half of the year will be pretty bumpy in part because europe still has not resolved itself. i think the second half of the year you'll start to see some improvement. but i don't think it's going to be all that impressive. i think the president is going to have a tough record to run on. i mean, we might get down to 8.5% unemployment. but that still looks pretty scary i think to most people. >> schieffer: i want to get back to politics a little bit so everybody join if... in, if you like. how do you see this playing out now, john? do you think we'll know early who this republican nominee is. i'm begin to go think it may be a while. it might go down to the convention and not know. >> a couple of scenarios.

it could go a very long while because the actual gel gates being selected in the republican process, we all have been paying a lot of attention to iowa, new hampshire, south carolina and florida. that's only 15%. that is just 15% of the sdel gates. it could go on quite a while. the reason it may not is that there are a limited number of candidates who can take it that far. mitt romney is one. he has a lot of money rick perry has a lot of money. but for somebody like newt gingrich he needs to do well and then start to get money. he has to actually go through the process. there are still 20 states before february that you need to get on the ballot. he has got a lot of organizational challenges that because his campaign was considered dead he doesn't have thing in line. you could also see a scenario where it ends quickly. if mitt romney does well because he doesn't have any more competitors who can make it. >> what do they think at the white house. >> the white house thinks romney will be the nominee. he's the only one who has the infrastructure to live out this entire process.

it could go long and they hope that it does so it drains mitt romney's cash cofers as well as his energy and doesn't allow him to pivot. we saw mitt romney try to pivot to train his... on the president when he was in new hampshire. it will be very difficult to do that when fighting on his right flange to defeat newt gingrich and even ron paul in a number of these early primaries. >> schieffer: does anybody but me remember the days when it was really fun to go to the convention because you didn't know who the candidate was going to be? i still think there's at least an outside possibility we may see that. okay. it's time for a prediction. fearless predictions from the cbs correspondents. liz palmer, what's your prediction for next year? >> one, maybe two civil wars in the arab world. and continuing enormous instability. >> schieffer: all right. bob orr? >> i think maybe for the first time cyber security catches

terrorism. maybe even passes terrorism as our top domestic security concern. i think we're about to for the first true cyber attack on a piece of critical infrastructure. we should watch for that, bob. >> schieffer: anthony mason. >> i think the economy struggles along, bob. i think we get a little improvement in the unemployment rate but not much. maybe 8.5%. jobs are still the biggest lingering problem in the economy. >> schieffer: david? >> if iran doesn't blink, israel will strike. >> schieffer: you're saying that israel will strike iran? >> it will go after its nuclear facilities, if iran doesn't blink. >> schieffer: what will the united states do if that happens, david? >> it has no choice but to support israel. and depending on what is evidence is at that time they might even want to take part in the raid. it depends on what kind of intelligence they have about that decision that iran has to make about whether to really build a bomb and go beyond putting all the pieces in

place which is what it's doing now. >> schieffer: nancy? >> i predict republicans will take control of the senate. they'll lose seats in the house but keep the majority. i think a day of reckoning is coming between house speaker john boehner and his number two man eric cantor because they have been on opposite sides of almost every major fight this year. the less charitable view is that cantor keeps cutting boehner's off at the knees. that has put republicans in very sticky predictions this jeer. >> a good prediction. very interesting to watch that. i'm hearing there have been secretive talks going on behind the scenes. the gang of six continues to meet regularly. i'm told they're very close to a deal that is 4-5 trillion dollar and they're working on that. i think that will be part of the debate is a significant deficit reduction plan that also includes major tax reform. >> schieffer: john? >> i think we actually are going to see on the super committee that failed to makes its $1.2 tril kron in cuts

those automatic cuts will happen january 1, 2013. they won't be able to come up with an agreement until after the election n the lame duck period when everybody is done with the politicking, there will be a little moment of opportunity where they will come to some kind of a deal and those ugly cuts which hit the defense department too much, that they'll come up with some kind of agreement. >> schieffer: my prediction i think we'll see a wholesale turnover in the congress. i think we'll see more incumbents turned out of office, both republicans and democrats, than in any other time since i've been here in washington. that's been a long time. thanks so all of you. it's been a lot of fun to get you together and hear your thoughts. i'll be back in a moment with some final thoughts. premier of the packed bag. you know organization is key... and so is having a trusted assistant. and you...rent from national.

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and push janet who's 6 chapters ahead. ♪ [ male announcer ] with interactive learning solutions from dell, mrs. davis can make education a little more personal. so every student feels like her only student. dell. the power to do more. some thoughts on this day of love that came to me after waiting on a plane at the orlando airport. i had a dream the other night about what heaven's gate might be like. it was like an airport boarding planes, yes, the pearly gates had two lanes. first class to the left. everyone else on the right. in that first class lane, some i hadn't seen before. no old school ties. some downright poor. like the widow who gave her last mite to one who needed it more. oh, they waved her right through the first class door. with a man who turned the

other cheek and the woman who forgave a thief and the fellow who stooped to help a child who had no food to eat. i didn't see a bold-faceded name or those that hunger after fame but the gate keeper knew all their faces. he was on the first name basis with those he waved through heaven's door. now i hate to add this to our song but the second line was mighty long. cheaters, schemers, lying, lovers, those who write down the faults of others. it's all politician that i knew and a journalist or two. a banker and a hedge fund czar up there, no one knows who they are. a creep, a con, an operator with black berry said on vibrator. he's waiting now to get the call to find out if it is his fate to be stuck forever outside the gate. only he who rules the streets of gold knows for sure, but i've been told they're all dead right to have those fears because i hear their line hasn't moved in years.

do you think they'll know your name up there in heaven? do you think you'll be a big celebrity? will you be a v.i.p.or have to show i.d.? do you think they'll know your name way up there? from all of us here at "face the nation" we want to wish you and your family a very merry christmas and a happy hanukkah. we'll see you next year. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org